Did you know that Uncle Sam is price-fixing milk?

The politicians keep making big claims about how their big plans are going to achieve big results for the economy. Those tempted to believe these claims may first want to consider how well the government does with their smaller schemes. For instance . . .

Did you know that the government sets minimum prices for milk? They claim that unregulated milk prices would fluctuate wildly, but consider these wild price fluctuations . . .

At the same time, droughts in California escalated feed prices, increasing the cost of milk production. Now, the government's formula for setting the "minimum price" of milk is far below the cost of production. As a result, dairy cattle are being sold for hamburger in record numbers - at a loss!

But the government's price-fixing applies only to Grade A milk, which must be safe enough to drink. Grade B milk is safe for manufactured foods, is cheaper to produce, and has no fixed price. So . . .

When farmers found that it was more profitable to produce Grade A milk because of the fixed price they overproduced the Grade A variety, which then supplanted Grade B for use in manufactured foods. This made processed foods more expensive, not more safe. This is another tax we all pay, and which hurts low-income families the most.

Aren't you glad we have the government to protect us from the free market?

There are simply too many things that determine prices - factors that price-fixing boards can neither predict nor control. Their ignorance of these factors must always be vastly larger than their knowledge. This means their price fixing schemes can never work.

Indeed, 90% of dairy farms have disappeared over the past 40 years, and this year's low prices will run more dairies out of business, creating even more unemployment during a recession.

This is the nature of price-fixing, and of regulation in general. Such schemes protect some businesses some of the time, gouge most consumers most of the time, and make the economy less productive all of the time. Everyone suffers, especially the poor.

Do you still want to trust the big claims being made about the politicians' big plans to save the economy? If they've made such a mess of the milk industry, just imagine what they're doing to the economy as a whole.

Milk drinkers got some good news earlier this month, when a federal judge threw out one of the strangest federal regulations on the books. Known as the Eau Claire rule, it allowed dairy farmers to collect a bonus for their milk based on how far their cows were from the Wisconsin city.

But consumers haven't won yet. Dairy farmers in about half the country are trying to outmaneuver the judge, and the U.S. Agriculture Department has requested a stay of the order while it appeals. "There will be chaos here if the judge's order stands," says Tom Thompson, a dairy farmer who is president of Georgia Milk Producers Inc.

In most of the country, prices for milk have been more heavily regulated than those for any other U.S. farm product. (Some states, such as California, opted out of the federal price scheme years ago.)

But a side effect has been the creation of an enormous bureaucracy. Administering the Eau Claire rule and other milk-price regulations takes a staff of about 500 at the Agriculture Department, almost as many people as the Office of Management and Budget uses to oversee all of federal spending. The rules cost consumers $1.7 billion some years, Agriculture Department studies show.

Now, in the wake of U.S. District Judge David S. Doty's ruling, some state lobbyists and lawmakers are scrambling to save local dairy farmers by forming regional pacts that would essentially keep out cheaper milk from elsewhere and drive the retail price even higher than the federal rules did.

"This is a nightmare," says John M. Schnittker, an economist at the Washington consumer advocacy group, Public Voice for Food & Health Policy. "Instead of our best chance at milk reform ever, we're getting cartels that will make things even worse."

The establishment of federally regulated minimum prices dates back to the 1930s, when dairy farmers had little market power. Unlike corn farmers, who can store their products until prices rise, dairy farmers must sell their daily production whatever the price. So the government created a formula for determining a minimum price that processors had to pay dairy farmers.

The Eau Claire bonus materialized in the 1960s when refrigerated trucks began making it possible to haul milk greater distances. Farmer-owned cooperatives in the upper Midwest thought the increase would make it more economical for them to ship their milk to regions suffering shortages. It became known as the Eau Claire rule because that city was in the heart of the Milk Belt.

Instead, the rule made dairy farming economical in places far from the Milk Belt. As a result, Wisconsin, whose cool climate makes cows more efficient at producing milk than they are in many other areas, is no longer the biggest milking state. A group of upper Midwest dairy farmers filed the suit that led to Judge Doty's decision knocking out the Eau Claire rule.

In fact, local dairies aren't necessary anymore. Megafarms are springing up in such places as New Mexico and Idaho that produce milk far more cheaply than the postcard-pretty Vermont dairy farm. In addition, processors are experimenting with filters to remove the water from milk, which makes shipping it cross-country cheaper.

But even before Judge Doty made his ruling, one region of the country -- New England -- had moved to protect its dairy farmers from competitors elsewhere. Sen. Patrick Leahy (D., Vt.) helped tag onto the 1996 farm bill approval for a six-state New England milk-price compact. Because the compact essentially flouts the constitutional protection of interstate commerce, it required congressional approval. Called the Northeast Interstate Dairy Compact, it insures that cheap Midwest milk doesn't undercut local producers' prices by pricing all milk the same.

Beginning in July, the commission set the minimum price to farmers for beverage-grade milk at $1.46 a gallon, a level that has been 5% to 22% higher than the federally mandated minimum price, which is recalculated monthly.

For the average Vermont dairy farmer, the compact is putting about $1,000 more a month into the bank. New England shoppers, meanwhile, are paying collectively about $5 million more for milk monthly, Public Voice figures. Several supermarket chains raised their retail milk prices 20 cents a gallon over the summer.

Now, state lawmakers and milk lobbyists elsewhere are rushing to follow New England's example. Arkansas, Louisiana and North Carolina have passed enabling legislation to form a Southeast compact, and similar bills are percolating in most of the rest of the Southern capitals. Farmers in New York, New Jersey and Pennsylvania are lobbying their state houses.

But it seems that no amount of price regulation can save inefficient operations forever. The number of U.S. dairy-farm operators has dropped 44% over the past decade to 126,800. New technologies -- such as genetically engineered hormones that stimulate milk production -- are making cows far more productive. But U.S. milk consumption is stagnant -- one reason the industry launched its expensive milk-mustache ad campaign several years back. In any case, the next regional dairy compact presented for congressional approval will undergo more scrutiny. Some lawmakers are angry about the first one. "It's an abomination," says Rep. Bob Goodlatte, a Virginia Republican. "A lot of members didn't know what was going on."

Price differentials were developed in the 1960s when the heart of dairy production was in Wisconsin and Minnesota. The "Eau Claire rule" increased the price of Class I (beverage grade) milk according to the distance from Eau Claire, Wis., that it was sold.

Then, early last November, U.S. District Judge David Doty in Minnesota said USDA could no longer enforce the pricing system.

When chaos began setting in and faced with numerous appeals, Judge Doty in December stayed his own ruling until Feb. 15 - in effect giving USDA two months to come up with a replacement for Class I differentials. As of presstime, no plan had been proposed.

Despite being one of the organizations requesting a stay, the International Dairy Foods Assn. says, "The judge was correct in recognizing the unfair and archaic milk pricing system in this country. The secretary (of Agriculture) should hold emergency meetings to deal with this issue."

So now USDA has one short-term headache and two longer term ones. Regardless of Judge Doty's decision, the 1996 Federal Agriculture Improvement and Reform Act calls for the Dept. of Agriculture to gradually remove dairy price supports and to reform the milk marketing order system.

The Federal Milk Marketing Orders, a Depression-era system to assure a local milk supply in all areas of the United States and to pay producers a "pooled" price regardless of milk classification, must be reduced from the current 32 orders (geographic regions) to between 10 and 14 by April 1999.

"Reform of Federal Milk Marketing Orders is essential to allow the dairy industry to continue to move toward more market-based pricing and to build stronger markets for its products," says Connie Tipton, IDFA sr. v.p. "It will also allow for more innovation in product development and product use.

"In addition," she continues, "government definition of pricing based on product utilization could limit new product ideas. In the end, we believe producers, processors and consumers will all prosper through less regulation and more attention to the marketplace."

Beginning in July, the commission set the minimum price to farmers for beverage-grade milk at $1.46 a gallon, a level that has been 5% to 22% higher than the federally mandated minimum price, which is recalculated monthly. For the average Vermont dairy farmer, the compact is putting about $1,000 more a month into the bank. New England shoppers, meanwhile, are paying collectively about $5 million more for milk monthly,

I must be misunderstanding this. Has anyone actually seen milk at that price or lower? Last year, I was paying over $4/gal for milk. Even today, after the huge drop in price, i'm still paying about $2.80, almost twice that minimum. If milk is already selling for much higher than the state/federal mandated minimums, how can the minimum cost be making shoppers spend extra money?

I must be misunderstanding this. Has anyone actually seen milk at that price or lower? Last year, I was paying over $4/gal for milk. Even today, after the huge drop in price, i'm still paying about $2.80, almost twice that minimum. If milk is already selling for much higher than the state/federal mandated minimums, how can the minimum cost be making shoppers spend extra money?

Here in Minnesota I've paid $2 - $2.50 a gallon for the last few months.

I must be misunderstanding this. Has anyone actually seen milk at that price or lower? Last year, I was paying over $4/gal for milk. Even today, after the huge drop in price, i'm still paying about $2.80, almost twice that minimum. If milk is already selling for much higher than the state/federal mandated minimums, how can the minimum cost be making shoppers spend extra money?

Yeah, the dairy farmers. Too bad it costs most of them over $2.00/gallon to produce it. If the minimum price to the farmer goes up, everyone along the food chain uses that as an excuse to jack up their rates, and the "greedy farmer" gets blamed while the middle man skims off the top.

Oh, well, you get what you pay for. If you only pay $2.50 for a gallon of milk, you are not going to get anything of quality. The whole industrialized farming paradigm runs on razor thin margins. It only takes a small shift from the consumer to greatly impact the entire food chain. My advice: if you cannot afford organic milk, save your $2.50. Highly processed industrial milk is poison and you are better off without it. This is not an exaggeration. If you withhold your milk money, possibly enough government-supported corporate farms will go out of business and real dairy farmers will take their place; your milk money can be used for actual milk and not something that just looks like it.

Except as to the rule of apportionment, the United States have an indefinite discretion to make requisitions for men and money; but they have no authority to raise either by regulations extending to the individual citizens of America.

I would say, "yes" but then I am biased. The chemicals that the cows ingest end up in the fats of the milk, so industrial butter and cream could have higher levels of pesticides/herbicides than even the food the cows eat that were directly sprayed. Cheese at least has gone through a microbial process where it is possible that some of the toxins have been broken down.

When milk is pasteurized, the bacteria is not removed, it is only killed. When many species of bacteria die, they release histamines. Most people who have "dairy allergies" are simply responding to the histamines in the milk, and not producing their own as in a typical allergic reaction. The hope is that organic milk would have higher standards so there would be fewer bacteria and therefore less histamine in the milk. This is not always the case, but you have a much better chance of getting cleaner milk if it is organic.

Industrialized farms often use artificial hormones to stimulate the cows to produce more milk. This has the unintended consequence of burning the cows out before they even reach maturity. Yeah, it sucks for the cows, but while they are producing ungodly amounts of milk in their artificially short careers, they are not healthy and an alarming amount of puss gets secreted into the milk. Most industrial dairy farmers understand this and will not even drink their own milk. All of the Organic dairy farmers I know have no problem drinking the milk they produce.

I really do not know how much of that crap gets into the cheese, but industrial butter is best used as gun oil for the Ruskies (sorry, cold war humor).

My microeconomics professor went over milk price supports on the blackboard. This is a classic case of how price supports are beyond ridiculous. There is so much social deadweight loss from this that it turns out that everyone would be better off if we simply gave the farmers the money equal to the difference between the subsidized price and the free market price and let the milk itself be subjected to the free market. But this is politically unfeasible because the voters are idiots and the politicians are thieves and whores. No one would stand for a politician who said "Let's just give money to the farmers!" But they will tolerate "Let's make sure the great American farmer gets a fair price for their product!" Basically what happens is that the milk consumers get royally screwed because they can't afford to buy as much milk, plus they get to give their tax money to the milk farmer.

"Vilsack says that if a new farm bill isn't passed soon, Congress may have to revert to a 1949 law that forces the government to buy milk from farmers at twice today's average price of $3.65 a gallon. Vilsack says the government could then pass those costs along to you."

I am puzzled over this wording. Given that government milk and cheese stores don't exists by what mechanism is government going to pass those costs along to me?

I do not drink milk , I can get it for $1.98 @ the local Aldi and often do to take South to the kids & grand kids when I visit .It is about $4 everywhere else. Costs are going to go up , due to smaller herds due to corn prices. The USDA needs to be eliminated. What milk costs matters not to me , other things are of more importance and are tied to corn as well.

"Vilsack says that if a new farm bill isn't passed soon, Congress may have to revert to a 1949 law that forces the government to buy milk from farmers at twice today's average price of $3.65 a gallon. Vilsack says the government could then pass those costs along to you."

I am puzzled over this wording. Given that government milk and cheese stores don't exists by what mechanism is government going to pass those costs along to me?

Besides raise your taxes, you mean?

Excellent and perceptive question. I believe their point is that the government will affect the market by overpaying for milk. And it may. But I hardly think the federal government will begin buying all the milk on the market, and I'm sure it's propaganda to suggest that the market will automatically pay as much as the government does.

Just because the Department of Defense is willing to spend six hundred bucks for a hammer doesn't mean your local hardware store thinks you're just as stupid.

Originally Posted by Calvin Coolidge

The American people must be free, and the way to do this is to have what government you have to have on the closest level to the people.

Originally Posted by Will Rogers

I have found out that when newspapers knock a man a lot, there is sure to be a lot of good in him.

Yeah, the dairy farmers. Too bad it costs most of them over $2.00/gallon to produce it. If the minimum price to the farmer goes up, everyone along the food chain uses that as an excuse to jack up their rates, and the "greedy farmer" gets blamed while the middle man skims off the top.

Oh, well, you get what you pay for. If you only pay $2.50 for a gallon of milk, you are not going to get anything of quality. The whole industrialized farming paradigm runs on razor thin margins. It only takes a small shift from the consumer to greatly impact the entire food chain. My advice: if you cannot afford organic milk, save your $2.50. Highly processed industrial milk is poison and you are better off without it. This is not an exaggeration. If you withhold your milk money, possibly enough government-supported corporate farms will go out of business and real dairy farmers will take their place; your milk money can be used for actual milk and not something that just looks like it.

I think that one may have been going on longer than any ? I buy it only for my Hummingbirds....

I believe it started in the '60s but don't quote me on that. I don't have my "Take the Rich Off of Welfare," book handy to reference. (Highly recommended read that outlines damn near all of the waste in Washington; sure to open your eyes to the scope of welfarism in America) There are hundreds of subsidies. Wheat, corn, sugar, etc. It costs the American taxpayer billions a year. (And that's just agricultural subsidies!) You start adding up energy subsidies and the M.I.C. and you really get a picture as to how we got to >16 trillion in debt.

ETA: Oh, and
nuclear subsidies
mining subsidies
media subsidies

Last edited by kcchiefs6465; 12-29-2012 at 03:25 PM.

“The nationalist not only does not disapprove of atrocities committed by his own side, but he has a remarkable capacity for not even hearing about them.” --George Orwell